Flown Pty Ltd v Goldrange Pty Ltd - [2016] WASC 419

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: FLOWN PTY LTD -v- GOLDRANGE PTY LTD [2016] WASC 419

CORAM: MASTER SANDERSON

HEARD: 7 SEPTEMBER 2016

DELIVERED : 22 DECEMBER 2016

FILE NO/S: CIV 2265 of 2016

BETWEEN: FLOWN PTY LTD (Administrators Appointed)
Plaintiff
AND
GOLDRANGE PTY LTD
First Defendant
CROWN VALLEY WA PTY LTD
Second Defendant

Catchwords:

Personal Property Securities Act 2009 (Cth) - Issue of ownership of chattels - Landlord with unperfected security over chattels claiming protection of security interest by 'constructive possession' - Landlord denied right of entry contrary to term of lease - Effect of s 24(2) of Personal Property Securities Act - Whether certain chattels fixtures

Legislation:

Personal Property Securities Act 2009 (Cth)

Result:

Property passes to plaintiff

Category: A

Representation:

Counsel:

Plaintiff:     Mr D P H Engelter
First Defendant             :     Mr G J Douglas
Second Defendant         :     Mr G J Douglas

Solicitors:

Plaintiff:     Williams & Hughes
First Defendant             :     Douglas Cheveralls Lawyers
Second Defendant         :     Douglas Cheveralls Lawyers

Case(s) referred to in judgment(s):

Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700
MacPhee Chevrolet Buick GMC Cadillac Ltd v SWS Fuels Ltd 2011 NSCA 35
National Australia Bank Ltd v Blacker (2000) 104 FCR 288
Strange Investments (WA) Pty Ltd v Coretrack Ltd [2014] WASC 281

MASTER SANDERSON: This case concerns the ownership of certain plant and equipment in leased premises. It raises three questions. First, was the plaintiff or the first defendant the owner of the plant and equipment in the leased premises. Second, does the plaintiff now have ownership of the plant and equipment by virtue of the provisions of the Personal Property Securities Act 2009 (Cth) (the PPSA). Finally, is the plant and equipment to be regarded as fixtures so that ownership of the plant and equipment remains with the first defendant as owner of the premises.
While the material facts are not seriously in dispute the sequence of events is of importance. It is therefore necessary to look in some detail at what actually occurred and particularly when it occurred.
The plaintiff relied principally upon two affidavits. One was sworn by Brett Cameron King and the other by Sarah Julia Forrest. Both were sworn on 22 July 2016. The defendants relied upon an affidavit of Mr Ray Jackson sworn 18 August 2016.
Mr King is a director of the plaintiff along with Mr Robert Forrest. Sarah Forrest is the wife of Robert Forrest. She describes herself as the chief financial officer of the plaintiff. From about February 2015 Mr and Mrs Forrest and Mr and Mrs King were involved in a business trading as BK Foods which was a wholesale distribution business for red meat, frozen products and small goods. In 2015 the parties became aware of an opportunity to purchase assets of two companies in liquidation - the Meat and Poultry Company Pty Ltd (in liq) and Drovers Pastoral Company Pty Ltd (in liq). Throughout his affidavit Mr King refers to these two companies as 'the Vendors' and I will adopt that description. The Vendors traded from Unit 5, Drovers Market Place, a retail precinct at 1397 Wanneroo Road, Wanneroo. Mr King had been aware of the business because he had dealings with it from time to time.
In July 2015 Mr King contacted Mr Ray Jackson. Mr Jackson is a director of the first defendant. The first defendant is the registered proprietor of Drovers Market Place. Mr King and Mr and Mrs Forrest then inspected the premises with Mr Jackson. The premises included a front retail area, a large processing area, store room, cool room and freezer. There were also offices and staff amenities. The premises contained fitout such as sales cabinets and point of sale equipment in the retail area, office furniture and computer equipment and plant and machinery used for meat processing and packaging.
Mr King says he was informed by Mr Jackson that the business assets could be purchased from the Vendors for $460,000 plus GST and that he would be prepared to offer a lease of the premises to the plaintiff. Mr King says he told Mr Jackson that the plaintiff could not afford to pay for the assets. He says Mr Jackson advised him the defendants would provide a loan to buy the assets which the plaintiff could repay. Mr and Mrs King and Mr and Mrs Forrest found the offer acceptable and they entered into a document entitled 'Offer to Lease' A copy of that document appears as attachment BCK2 to Mr King's affidavit. Annexure 'A' to the agreement contains six 'special conditions'. Relevantly special condition 4 reads as follows:
The Lessee will enter into an agreement with the current liquidator, Avior Consulting Pty Ltd, to purchase the business name, plant and equipment for an amount of $460,000. The Lessor will fund this purchase over a 5 year period at 6% interest and can be paid out at any time. The plant and equipment will remain the property of the Lessor until fully paid out.
Mr Jackson says on 24 July 2015 he sent an email to Mrs Forrest asking for a copy of the list of plant and equipment so that 'I could organise the loan from my bank to purchase the plant and equipment'. Mrs Forrest responded the same day. A copy of that response is found as attachment RJ3 to Mr Jackson's affidavit. On the same day Mr Jackson contacted his bank, Bankwest, to finalise a loan for the purchase of the plant and equipment. He says he had arranged pre‑approval of the loan and he received a reply the same day attaching a quote for the proposed loan. That quote is attachment RJ4 to Mr Jackson's affidavit. That quote was in response to an email Mr Jackson sent to Bankwest. Relevantly that email reads as follows:
Noni Martin from Bankwest Property Unit has requested that I contact you, as Vanessa is away, regarding buying plant & equipment for the butcher shop at Drovers. We are buying the P&E from the liquidator and on selling to the new lessee over 5 years. The P&E will be in Goldrange's control until they make the final payment. We are seeking $460k + GST. The GST will be repaid on refund from the Tax Dept leaving the loan at $460k. The borrower will be Goldrange Pty Ltd.
On 30 July 2015 Mrs Forrest sent an email to Mr Jackson attaching the tax invoice for the purchase of the plant and equipment. A copy of that email is attachment RJ7 to Mr Jackson's affidavit. In her affidavit of 22 July 2016 Mrs Forrest says that she received an email on 23 July 2015 from Mr Jackson confirming that the first defendant would fund the purchase of the plant and equipment. A copy of that email is attachment SJF1 to Mrs Forrest's affidavit. It reads as follows:
Just confirming I will fund the $460,000 for the P&E purchase, through my bank.
Mrs Forrest confirms on 24 July 2015 Mr Jackson emailed her asking for a copy of the plant list to be provided to his bank. On 30 July 2015 Mr Jackson emailed Mrs Forrest asking for an invoice from the plaintiff to the first defendant for the purchase of the plant and equipment. A copy of that email is attachment SJF4 to Mrs Forrest's affidavit. In relation to this email Mrs Forrest says:
I did not understand why Mr Jackson needed this, but I prepared and sent through the invoice to him as requested. The invoice set out details of the purchase by Flown from the Vendors [11].
Mrs Forrest then provides a copy of the invoice as attachment SJF6 to her affidavit.
On or about 25 July 2015 the plaintiff entered into an asset sale agreement with the Vendors to acquire some stock, the business name and certain assets listed in sch 2 of that agreement. The total purchase price was $560,000 (plus GST) of which $100,000 (plus GST) was apportioned to stock and $460,000 (plus GST) was apportioned to plant and equipment. The plaintiff paid for the stock. It did not pay for the plant and equipment. On or about 1 August 2015 the plaintiff entered into a loan agreement with the first defendant pursuant to which the first defendant was to loan funds required to purchase the plant and equipment to the plaintiff. A copy of that agreement is attachment BCK6 to Mr King's affidavit.
The loan agreement describes the first defendant as 'the Lender' and the plaintiff as 'the Borrower'. The recitals to the agreement are as follows:
AThe Borrower is a tenant of the Lender.
BThe Lender is providing a loan to the Borrower for the purchase of plant & equipment, secured by the plant & equipment on the terms of this Agreement and guaranteed by the directors of the Borrower.
Any fair reading of that agreement makes it plain the first defendant was lending the money it had borrowed from Bankwest to the plaintiff to allow for purchase of the plant and equipment. It may be that position would come as something of a surprise to Bankwest. Be that as it may, there is no doubt as to the terms of the agreement between the plaintiff and the first defendant. Moreover, the loan agreement contains the following provision:
No variation of or any waiver of any of the terms of or conditions of this Agreement will be of any force or effect unless they are in writing and executed by the Parties (cl 11).
It may well have been the case that it was originally intended between the parties that the first defendant would purchase the plant and equipment and retain all right, title and interest until payment was made of the full amount of the loan. But if that was the original intention of the parties it is not reflected in the loan agreement. The loan agreement supersedes any earlier agreement. Clause 11 makes that plain. That being so ownership of the plant and equipment passed to the plaintiff. The first defendant did not retain any interest in it. This issue must be determined in the plaintiff's favour.
The plaintiff then entered into a lease with the first defendant for the premises. The terms of that lease are important and I will deal with these later in these reasons. On 11 August 2015 Mr King was advised completion under the asset sale agreement had occurred.
Unhappily the business did not go well. By July 2016 Mr King and his fellow directors had reached the conclusion they could not continue to trade. On Wednesday, 13 July 2016 they talked to the staff about finishing up working in the next couple of days. One way or another it came to Mr Jackson's attention the plaintiff might cease trading. This would not have come as a surprise to Mr Jackson as the plaintiff had by then defaulted on its lease payments.
In his affidavit Mr Jackson sets out his version of what happened thereafter. This version of events differs slightly from the version found in the affidavits of Mr King and Mrs Forrest. However, for the purposes of this application I am prepared to accept Mr Jackson's evidence. It is of course the version of events most favourable to the defendants. It reads as follows:
On 14 July 2016, which was a Thursday, I rang both Mr King and Mr Forrest in the morning on their cell phones and failed to make contact, so I left messages for them to contact me. I went down to the Premises and knocked on the window. Brett King was in the retail shop area and I spoke to him about what I had heard. I asked him if they were closing down, and ceasing to trade at 5pm on Friday 15 July 2016. Mr King said to me words to the effect that they were closing down, on advice of their lawyers. Mr King said to me that Steggells were forcing them to take this action, as they owed Steggells and under their personal guarantee they were in trouble. He said to me that they owed something like $600,000 - $800,000. I said to Mr King words to the effect that I could come to an agreement with them to terminate the lease straight away and they could walk away, leaving the shop and all the plant and equipment. I said that I'd call it even - including the money still owed on the equipment, I'd bring in a caretaker straight away so that shop stayed open. Mr King said he was taking advice at the moment and couldn't agree to anything. He again said that they were trading up until 5:00pm on Friday night. I replied with words to the effect that I would take over then, although Mr King just repeated that he was taking advice.
I returned to my office. The plaintiff was behind on its rent, and based on what the directors of the plaintiff had just told me, it was also insolvent. Accordingly, pursuant to clause 12 of the lease I arranged for a termination notice to be prepared by my solicitors, Douglas Cheveralls Lawyers.
I took several copies of the termination notice and I went back to the Premises to hand the directors the termination notice to take possession and end the lease. They were not there, so I tried to call both Mr King and Mr Forrest, but they did not answer their phones. I was told by an employee of the plaintiff that the directors were not there, so I went back to the cafe where I had spoken with Mr King and Mr Forrest. This cafe is in the same building as the Premises.
At approximately 3.45pm I was at the café, Mr King and Mr Forrest were seated with another person, having coffee. I approached them and asked to talk to them. Mr King followed me to another table and I served him with the Termination Notice. A few minutes later Mr Forrest joined us. I also served him with the Termination Notice. He called Mrs Forrest. A few minutes later Mrs Forrest arrived and I also served her with the same notice. Attached and marked RJ17. is a true copy of this termination notice. Mrs Forrest became very angry and said she had legal advice and started to make phone calls. Mrs Forrest said that they didn't have to take these notices. I said words to the effect that I had served the notice on them.
I said to Mr King and Mr Forrest words to the effect that even though we had taken possession I could possibly let them back in to sell their remaining stock by trading under a license for the rest of Thursday and on Friday. I was trying to help minimise the amount of perishable stock that would be leftover, and to help them bring some cash in that could be used to pay creditors. At some point during the discussion I asked Mr King and Mr Forrest to meet me at the café the following morning at 9:30am, so that we could discuss the arrangements for their departure, and to meet Frank Delli‑Benedetti at 10am. Mr King and Mr Forrest agreed to attend these meetings. They did not turn up to either of these meetings.
On the same afternoon I sent an email to Brett King and Sarah Forrest attaching a copy of the termination notice that I served on them earlier that day. I also sent the same email to Rob Forrest attaching the termination notice. Attached and marked RJ18. is a true copy of these emails.
Later that evening I caused my solicitors to prepare a letter confirming that I would provide a license to the plaintiff for Friday, 15 July 2016, which I sent to the plaintiff that evening.
The following day, at around 7:15am my office administrator advised me that she had received an email from the plaintiffs attaching a remittance advice for the payment of the outstanding rent. The email's timestamp indicated that it had been sent at 4:25pm the previous day (Thursday, 14 July 2016) 40 minutes after I had served the notices. Attached and marked RJ19. is a true copy of this email.
On 15 July 2016 at 10:36am I sent an email to Rob Forrest, Sarah Forrest and Brett King attaching a letter from my lawyers again stating the fact that the lease had been terminated, and that the plaintiff was now occupying the premises pursuant to a license granted by the first defendant. This letter requested confirmation from the plaintiff's directors that they accepted the license, and stated that unless the confirmation was provided by 11:30am that day, then the license would automatically be revoked. Attached and marked RJ20. is a true copy of this email.
I then went to the Premises and handed the same letter to Mr Forrest. I arrived there with my son Darren Jackson and a security guard from Secure Zone Security at around 11:00am to remove the tenants.
I said to Mr Forrest that if I did not receive the confirmation requested in the letter by 11:30am then I would immediately change the locks on the premises. Mr Forrest then said to me words to the effect that I would get out of his way or he would come out swinging. I understood from this that he meant that he would attack me physically. I called the police, but they said that they could not help me because it was a civil matter.
Mr Forrest's daughter was also at the premises, and repeatedly told me that because the plaintiff had paid its rent we had no right to enter the premises.
After about 15 minutes Mr King came to the warehouse area and I asked him if he had seen the letter I had sent earlier that morning. I again explained that I needed confirmation in writing by 11:30am, and tried to hand him a copy of the letter. Mr King said he had not seen the letter, and that he was too busy to read it as he was returning products to their suppliers. Mr King then left.
I did not receive a reply to the letter regarding the license by 11:30am. I had previously arranged for a carpenter to arrive and change the locks, he turned up a little after 11:00am. After 11:30am I attempted to gain access to the premises by opening the door, but the plaintiff's staff physically held the door closed and refused to allow me to enter the Premises. I said to the plaintiff's staff words to the effect that the plaintiff's lease had been terminated and I was going to change the locks. I said to them that they should leave. The plaintiff's staff did not listen to me and continued to block my access to the Premises. Mr Forrest was present during my attempted entry and he assisted his staff in physically blocking my entry. He was very physical. After about half-an-hour of trying to access the Premises I sent the carpenter away because I was concerned that Mr Forrest would become violent towards us, and because his staff were also being uncooperative.
I returned to my office and about 15 minutes later my son called me and advised me that there were 2 police cars there. He said to me that they were looking for a group of bikies threating to beat people up. When I arrived back at the warehouse the 3 police officers were talking to the plaintiff's staff and Mr King at the Premises' office door.
The officers came over to me and told me that I had no right to try to enter the premises. I said to them words to the effect that I did have the right to enter the premises, and that I was entitled to eject them pursuant to the expired license and the Lease. The police refused to listen to me and repeated that I had no right to enter the premises and then drove off.
I did not want to be arrested, or to be hurt if Mr Forrest became violent, so I again went back to my office and obtained some notices to attach to the doors of the Premises. I received the notices at 12:47pm and immediately went to the Premises and attached them to the doors. They were attached sometime around 1:00pm. I attached the notices to the main office and 3 other entry doors to the processing and storage areas. When I placed the notice on the office door, a person who I did not recognise came out to see what the sign said and took a photograph of it. Attached and marked RJ21. is a true copy of the notice I placed on the doors of the premises.
I also took a photograph of the notice that I attached to the door of the Premises. Attached and marked RJ22. is a true copy of the photos I took of the notice attached to the Premises doors.
I stayed close to the Premises for the rest of the afternoon, in case I could gain access and eject the plaintiff. At around 4:00pm that afternoon I was at the entry to the Butcher shop when Mr Alex Harper of P&B Advisory approached me. He said to me that the plaintiff was now in liquidation and that P&B Advisory was now in control and my termination notice served on the plaintiff on 14 July 2016 was invalid.
I returned to the Premises at 7:00am on Saturday morning. The notice had been removed from the entry door. I met with the director of the second defendant, Frank Delli-Benedetti, and entered into a license agreement authorising the second defendant to enter into the Premises and commence trading.
At around 7:15am that morning, together with my son, Shayne Jackson and an electrical sub-contractor, Andy Fallon, I cut the locks from the door and entered the Premises. I took a number of photos when entering the premises and upon my initial entry. Attached and marked RJ23. is a true copy of the photos taken by me at the Premises that morning [36] ‑ [56].

As I mentioned above timing is all important. In par 39 Mr Jackson says he served a termination notice on Mr King and Mr Forrest at 'approximately 3.45pm'. He served the same termination notice on Mrs Forrest '[a] few minutes later'. The first question is whether the services of these notices was sufficient to terminate the lease.
Clause 1 of the lease is headed as 'Definitions & Interpretation'. There is no definition of 'notice'. There is a definition of the phrase 'Landlord's Notice' and that refers to cl 3.4(a) of the lease. There is no such clause. Clause 18 of the lease deals with 'notices'. It reads as follows:
Any notice, document or demand ('notice') under this Lease shall be served in accordance with this clause.
(a)The notice shall be in writing, signed by the party giving it, or by the party's duly authorised officer (if a corporation), agent or solicitor.
(b)A notice may be served on a party to this Lease, including their successors, assigns, and guarantors
(i)by personal delivery to that party or if more persons than one are Landlords or Tenants to any one of them;
(ii)in the case of the Tenant by delivering the notice to the Leased Premises and leaving it with the Tenant or an employee of the Tenant;
(iii)in the case of the Landlord by delivering the notice to the Landlord's business address and leaving it with an employee of the Landlord;
(iv)by sending it, addressed to the party at that party's address stated in this Lease by prepaid security post or certified post; or
(v)if the Landlord maintains a centre manager's or administrator's office in the Building, by delivering any notice addressed to the Landlord to that office whilst it is open and leaving it with a person working in that office.
(c)Either party may advise the other party of an additional or an altered address for the service of notices, which is within the State of Western Australia and is not a post office box.
(d)A notice is considered to have been served:
(i)at the time of delivery; or
(ii)on the third Business Day after the day on which it is posted, the first Business Day being the day of posting.
In the schedule to the lease the 'Tenant' is said to be Flown Pty Ltd. Its address (which presumably is its registered office) is 12 Carey Street, Bunbury. Clearly then the termination notice was not served on the tenant pursuant to cl 18(b)(i). That would have required service on the tenant's registered office in Bunbury. Nor was service of the notice effected pursuant to cl 18(b)(ii). Mr Jackson says the termination notices were delivered to Mr and Mrs Forrest and Mr King at a coffee shop not at the leased premises. It would seem then that there was no service of any termination notice made pursuant to the lease.
Clause 12 of the lease deals with 'Default or Repudiation by Tenant'. Relevant cl 12.1 reads as follows:
12.1.Events of Default
If:
(a)any part of the Rent shall at any time be in arrears or unpaid for 7 days after the same shall have become due (whether or not any formal or legal demand shall have been made); or
(b)the Tenant assigns, transfers, sub-lets, mortgages, charges, parts with the possession of or otherwise deals with any estate or interest in the Leased Premises created by this Lease or implied at law, or agrees so to do other than in compliance with Clause 9; or
(c)the Tenant shall at any time fail or neglect to duly perform or observe any of the covenants conditions or agreements contained in this Lease or implied herein and such breach or non performance shall continue for 14 days after written notice thereof shall have been given by the Landlord to the Tenant to remedy the same; or
(d)the Tenant is insolvent or
(e)any execution either by writ or warrant or by appointment of a receiver be levied on or against any of the property or assets of the Tenant; or
(f)the Leased Premises shall be deserted or vacated,
then and in any such case it shall be lawful for the Landlord or any person authorised by the Landlord to re-enter the Leased Premises or any part of it in the name of the whole and upon the re-entry this Lease and the Term shall cease and determine without prejudice to any right of action or remedy of the Landlord in respect of the breach non‑performance or non‑observance of any covenant or condition hereof by the Tenant and the Landlord shall be released and discharged from any action claim or obligation howsoever arising to the Tenant.
For the purposes of the re-entry the Landlord or the Landlord's appointed agent or servant shall have power to open by any means any door or fastening for the purpose of resuming possession of the Leased Premises and to expel and remove all persons furniture and other property from the Leased Premises (without being liable for any action for trespass, assault or other proceedings whatsoever for so doing).
It is clear if the first defendant wished to terminate the lease it had to do so under either cl 12.1(a) or (d). Although it is highly likely the plaintiff was insolvent at the time the first defendant purported to terminate the lease there is no evidence on that issue one way or the other. But it is clear the plaintiff had been in default in payment of rent and that default had persisted for seven days. So when the first defendant through Mr Jackson purported to terminate the lease it had the right to take that step pursuant to cl 12.1(a) of the lease.
What cl 12.1 actually allows is the landlord 'to re‑enter the Leased Premises'. Upon re‑entry the lease is determined; it is not determined upon the giving of any notice or in some other way advising the tenant the lease has come to an end. On Mr Jackson's evidence he did not actually re‑enter the premises until around 7.15 am on 16 July 2016. It was at that point the lease terminated.
However, Mr Jackson had attempted to re‑enter the premises at 11.30 am on 15 July 2016. There can be no doubt he had a right pursuant to cl 12.1 to enter the premises. The clause says 'it shall be lawful for the Landlord or any person authorised by the Landlord to re-enter the Leased Premises'. So although Mr Jackson was prevented from entering the premises the plaintiff's directors and staff were acting contrary to the terms of the lease. Had they acted in conformity with their legal obligation when approached by Mr Jackson they would have stood aside, allowed him and his workman to enter the premises, and they would have allowed Mr Jackson to do as he wished with the persons and property found on the premises.
Turning then to the affidavit of Mr King. Prior to 13 July 2016 Mr King had approached PPB Advisory. After his interaction with Mr Jackson on 14 July 2016, Mr King says he called PPB with the intent of putting the plaintiff into administration. He then says:
Around 1pm that day (Friday 15 July 2016) Alex Harper and Magnus Howie from PPB attended the Premises with documents to put the company into voluntary administration. From memory, at that time Mr Jackson was not around although the security guard and Mr Jackson's son were still there.
Robert and I straight away signed documents to appoint Simon Theobald and Melissa Humann as administrators of Flown [37].
Appearing as attachment BCK12 to Mr King's affidavit is a copy of the minutes of the meeting of directors. Appearing as attachment BCK13 is a copy of 'Appointment of Administrators'. Neither of these two documents gives any indication of what time the meeting of directors took place or the time when administrators were appointed. Neither of Mrs Forrest's affidavits deal with that issue. Of course Mr Jackson can have nothing to say on the matter. In the circumstances then it is reasonable to assume the plaintiff was put into administration at around 1.00 pm on 15 July 2016.
It is common ground between the parties that pursuant to cl 5.1 of the loan agreement the first defendant had a security interest over the plant and equipment. Pursuant to cl 5.1(a) the first defendant could have registered that charge on the Personal Properties Security Register (the PPSR) pursuant to the provisions of the PPSA. It did not do so. Therefore its interest in the plant and equipment is unperfected. Pursuant to s 267 of the PPSA where a security interest is unperfected and a grantor enters into administration the unperfected security interest vests in the grantor. The secured party is then able to prove in the administration for the owed amount as an unsecured creditor. That is what the plaintiff says happened here.
The defendants view matters differently. In order to perfect a security interest under s 21 of the PPSA a secured party must either register a secured interest on the PPSR or have possession of the collateral. Under s 21(2)(b) of the PPSA the possession of the collateral cannot be as a result of seizure or repossession. It is the defendants' position they were in constructive possession of the collateral from 11.30 am on 15 July 2016. Furthermore, they did not seize or repossess the collateral. Rather they exercised a lawful right to re‑enter the premises and as a consequence came into possession of the collateral. So they are not disqualified by the provisions of s 21(2)(b).
The plaintiff has two answers to that submission. First, it says rightly or wrongly the first defendant was not actually in possession of the leased premises and therefore of the plant and equipment. By the time the first defendant did obtain possession of the plant and equipment - on Saturday, 16 July 2016 - the administrators had been appointed. Second, they refer to s 24(2) of the PPSR. That section is in the following terms:
A grantor or debtor cannot have possession of personal property if the property is in the actual or apparent possession of the secured party, or another person on behalf of the secured party.
Against those background facts and legislative framework the issue of possession must be resolved. The starting point is cl 2.32 of the Replacement Explanatory Memorandum attached to the Personal Properties Securities Bill 2009 (Cth). That clause reads:
Possession under the Bill would not equate to the common law meaning of possession. Possession would include both apparent and actual control of the property (clause 24(2)). Even if a secured party has actual possession of collateral, if it appears to be in the possession of the grantor (or another person on behalf of the grantor), the secured party would not have possession of the collateral (clause 24(1)). It follows that when goods in the secured party's possession are transferred to the grantor's possession, the security interest becomes unperfected (unless perfected by another means, such as by registration or through temporary perfection of returned collateral (clause 36).
The relevance of possession to the ownership of a chattel was considered by Pritchard J in Strange Investments (WA) Pty Ltd v Coretrack Ltd [2014] WASC 281. Her Honour said:
Possession of a chattel is evidence of ownership of that chattel - so much so that possession of a chattel is regarded as generating a rebuttable presumption of ownership. Consequently, it is generally accepted that possession is the most important of the incidents of ownership of a chattel. The law of possession 'is ancient and fairly complicated', and the meaning of possession varies in different areas of the law. In the case of tangible chattels, possession (which is sometimes called actual or de facto possession) usually requires physical possession of the good, plus the intention to possess that good (that is, to exclude others from the exercise of control over it). However, a person who does not actually have physical possession of a good may nevertheless be held to be in possession of the good if he or she has control over that good, together with the requisite intention. This is sometimes referred to as legal possession or constructive possession. Alternatively, a party may not have actual possession but may have a right to immediately acquire physical possession, which is referred to as a right to possession [76]. (footnotes omitted)
It is not generally the case in Australian jurisprudence that a party benefits from not observing the provisions of a contract. But that does seem to be the effect of the law in this case. The fact is the plaintiff retained possession of the plant and equipment. A stranger visiting the Drovers Marketplace sometime after 11.30 am on 15 July 2016 and walking passed the leased premises would have seen nothing out of the ordinary. The person would have said the tenant was apparently in possession of the fixture and fittings. They were not to know the first defendant was as a matter of law entitled to be in possession of the premises and as a consequence to be in possession of the fixtures and fittings.
The position changed from around 1.00 pm. Mr Jackson had attached to the premises the document entitled 'Notice of Re‑entry'. That notice included the following:
TAKE NOTICE that Goldrange Pty Ltd has re‑entered this premises (sic) and retaken possession from Flown Pty Ltd.
In fact that statement is factually incorrect. As I have indicated possession of the premises was actually retaken around 7.15 am the following day. By placing the notice on the premises as he did, Mr Jackson could not and did not take possession of the leased premises. Thus he could not have possession of the fixtures and fittings within the meaning of s 24(2) of the PPSA.
Counsel referred to a number of Canadian and New Zealand authorities none of which really deal with the issues raised in this action. Perhaps the most relevant of these authorities is the decision of MacPhee Chevrolet Buick GMC Cadillac Ltd v SWS Fuels Ltd 2011 NSCA 35. This was a decision of the Court of Appeal in Nova Scotia. The court did quote with approval a section entitled 'What Constitutes Possession' from a text by Cuming, Personal Property Security Law (212 ‑ 13):
Perfection by possession requires actual physical possession by the secured party or an agent or bailee of the secured party other than the debtor or debtor's agent. The Act provides that a secured party does not have possession of collateral that is in the actual or apparent possession or control of the debtor or debtor's agent. Consequently, the common law concept of constructive possession has not been imported into the Act since it permits a debtor to be in apparent possession or control of the collateral.
It is clear the first defendant was not in actual possession of the fixtures and fittings as at the time of the appointment of the administrator. Accordingly, the unperfected interest passed to the administrator and does not provide any entitlement to the first defendant to actual possession of the fixtures and fittings.
The remaining question is whether or not the fixtures and fittings are fixtures. The starting point in any consideration of whether a chattel has become fixed to the land is the decision of Sir Frederick Jordan in Australian Provincial Assurance Co Ltd v Coroneo (1938) 38 SR (NSW) 700, 712. His Honour said:
A fixture is a thing once a chattel which has become in law land through having been fixed to land. The question whether a chattel has become a fixture depends upon whether it has been fixed to land, and if so for what purpose. If a chattel is actually fixed to land to any extent, by any means other than its own weight, then prima facie it is a fixture; and the burden of proof is upon anyone who asserts that it is not: if it is not otherwise fixed but is kept in position by its own weight, then prima facie it is not a fixture; and the burden of proof is on anyone who asserts that it is: Holland v Hodgson. The test of whether a chattel which has been to some extent fixed to land is a fixture is whether it has been fixed with the intention that it shall remain in position permanently or for an indefinite or substantial period: Holland v Hodgson, or whether it has been fixed with the intent that it shall remain in position only for some temporary purpose: Vaudeville Electric Cinema Ltd v Muriset. In the former case, it is a fixture, whether it has been fixed for the better enjoyment of the land or building, or fixed merely to steady the thing itself, for the better use or enjoyment of the thing fixed: Holland v Hodgson; Reynolds v Ashby & Son; Colledge v H C Curlett Construction Co Ltd; Benger v Quartermain. It if is proved to have been fixed merely for a temporary purpose it is not a fixture: Holland v Hodgson; Vaudeville Electric Cinema Ltd v Muriset. The intention of the person fixing it must be gathered from the purpose for which and the time during which user in the fixed position is contemplated: Hobson v Gorringe; Pukuweka Sawmills Ltd v Winger. If a thing has been securely fixed, and in particular if it has been so fixed that it cannot be detached without substantial injury to the thing itself or to that to which it is attached, this supplies strong but not necessarily conclusive evidence that a permanent fixing was intended: Holland v Hodgson; Spyer v Phillipson. On the other hand, the fact that the fixing is very slight helps to support an inference that it was not intended to be permanent. But each case depends on its own facts.
In National Australia Bank Ltd v Blacker (2000) 104 FCR 288, Conti J identified a number of factors that courts will generally take into account in determining the object and degree of annexation. They are:
1.whether the attachment was for the better enjoyment of the property generally or for the better enjoyment of the land and/or buildings to which it was attached;
2.the nature of the property the subject of the affixation;
3.whether the item was to be in position either permanently or temporarily;
4.the function to be served by the annexation of the item;
5.whether removal would cause damage to the land or buildings to which the item is attached;
6.the mode and structure of annexation;
7.whether removal would destroy or damage the attached item of property;
8.whether the costs of renewal would exceed the value of the attached property.
Applying those principles to this case there is no doubt in my view none of the fixtures and fittings are properly to be regarded as fixtures. Attached to and forming part of the originating summons is a schedule. That schedule prepared by the auction firm Gregsons sets out the items that form the fixtures and fittings. Some are obviously not fixtures - for instance, 11 stainless steel floor trolleys. But even the more substantial items such as preparation benches and meat display cabinets are easily removed and do not fit within the general characteristics of chattels which have become part of the property. Accordingly, there is no basis in my view for suggesting that the fixtures and fittings have been retained by the first defendant because they are fixtures.
Reference is made in the originating summons to two motor vehicles which formed part of the fixtures and fittings. There can be no suggestion that they are anything other than chattels and they would of course pass to the administrator of the plaintiff.
The plaintiff is entitled to orders largely in terms of the originating summons in this matter. I will hear from the parties as to the precise form of orders and as to costs.